Tweet
EDITORIAL - A hard look at Air Jamaica
published: Monday | December 1, 2008
There is, to use an appropriate cliché, hardly a snowball's chance in hell that Air Jamaica will, or can, be divested by the end of the current fiscal year on March 31; or, for that matter, any time soon thereafter, except, perhaps, it is a strip-down giveaway.
Don Wehby, the finance ministry minister who has responsibility for the airline, knows this. So, it is time that the Government begins to talk frankly about the state of the airline and what is to be done when the deadline passes and Air Jamaica remains a burden that taxpayers can ill-afford to carry.
Nothing short of scandalous
In the circumstances, it is nothing short of scandalous, that, as Air Jamaica's new president, Bruce Nobles, recently suggested to be the case, the Government has not yet figured out its back-up plan for when the sale doesn't happen. Indeed, such a dereliction of fiduciary responsibility would be more egregious in the context of the times: a global financial meltdown that has deepened the crisis in the Jamaican economy and further fiscal strain for the Government, which is under threat from rating agencies for a downgrade of its instruments.
Air Jamaica is not an insignificant contributor to Jamaica's fiscal problems. In the last dozen years or so, it has lost around US$1.3 billion, including US$170 million in 2007. It will, at least, match last year's deficit, or worse, in the current year. And, that is notwithstanding the Government's committed subsidy to the airline of US$30 million a year.
Additionally, over half a billion US dollars of Air Jamaica debt is a contingent liability of the Government: it is part of the stock of debt that gives Jamaica a debt-to-GDP ratio of over 125 per cent.
Even in better times, we hardly believe that Air Jamaica would find, as Mr Wehby is looking for, "a major international partner" who would not only be able to deliver operational efficiencies, but make this small carrier "a viable option for people around the world". We never shared the Government's optimism of major carriers seeing Air Jamaica as a strategic fit for global expansion. And, these are far from good times for the airline industry, or for almost any industry.
We, however, accept that Air Jamaica does have value for Jamaica's tourism economy, but how strategic that is, or what it is worth, we do not know. It has never been rigorously explored, which is not to say that numbers have not been offered.
Serious analysis
Our suggestion, therefore, is a serious analysis, taking into account the specific circumstances of this country, of what a profitable Air Jamaica would look like: its fleet configuration and optimum routes. This study, too, should analyse the costs and benefits (and to whom) of Air Jamaica operating outside its base of optimum efficiency, in support, we are told, of the strategic interest of the tourism sector. And, we should come to a conclusion of who should pay for beyond what is operationally profitable for the airline.
In other words, Air Jamaica, if it is not closed, must cut back to a size that is efficient and profitable, beyond which, those who get the bulk of the benefit should pay proportionately. In the event, it wouldn't cost US$170 million a year for price support arrangements with other carriers.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
published: Monday | December 1, 2008
There is, to use an appropriate cliché, hardly a snowball's chance in hell that Air Jamaica will, or can, be divested by the end of the current fiscal year on March 31; or, for that matter, any time soon thereafter, except, perhaps, it is a strip-down giveaway.
Don Wehby, the finance ministry minister who has responsibility for the airline, knows this. So, it is time that the Government begins to talk frankly about the state of the airline and what is to be done when the deadline passes and Air Jamaica remains a burden that taxpayers can ill-afford to carry.
Nothing short of scandalous
In the circumstances, it is nothing short of scandalous, that, as Air Jamaica's new president, Bruce Nobles, recently suggested to be the case, the Government has not yet figured out its back-up plan for when the sale doesn't happen. Indeed, such a dereliction of fiduciary responsibility would be more egregious in the context of the times: a global financial meltdown that has deepened the crisis in the Jamaican economy and further fiscal strain for the Government, which is under threat from rating agencies for a downgrade of its instruments.
Air Jamaica is not an insignificant contributor to Jamaica's fiscal problems. In the last dozen years or so, it has lost around US$1.3 billion, including US$170 million in 2007. It will, at least, match last year's deficit, or worse, in the current year. And, that is notwithstanding the Government's committed subsidy to the airline of US$30 million a year.
Additionally, over half a billion US dollars of Air Jamaica debt is a contingent liability of the Government: it is part of the stock of debt that gives Jamaica a debt-to-GDP ratio of over 125 per cent.
Even in better times, we hardly believe that Air Jamaica would find, as Mr Wehby is looking for, "a major international partner" who would not only be able to deliver operational efficiencies, but make this small carrier "a viable option for people around the world". We never shared the Government's optimism of major carriers seeing Air Jamaica as a strategic fit for global expansion. And, these are far from good times for the airline industry, or for almost any industry.
We, however, accept that Air Jamaica does have value for Jamaica's tourism economy, but how strategic that is, or what it is worth, we do not know. It has never been rigorously explored, which is not to say that numbers have not been offered.
Serious analysis
Our suggestion, therefore, is a serious analysis, taking into account the specific circumstances of this country, of what a profitable Air Jamaica would look like: its fleet configuration and optimum routes. This study, too, should analyse the costs and benefits (and to whom) of Air Jamaica operating outside its base of optimum efficiency, in support, we are told, of the strategic interest of the tourism sector. And, we should come to a conclusion of who should pay for beyond what is operationally profitable for the airline.
In other words, Air Jamaica, if it is not closed, must cut back to a size that is efficient and profitable, beyond which, those who get the bulk of the benefit should pay proportionately. In the event, it wouldn't cost US$170 million a year for price support arrangements with other carriers.
The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.
Comment